SAM Rainsy warned Sihanouk-ville land speculators that Prince Ranarridh has

agreed to destroy walls around their plots of land, and return the land to the

Royal Government.

The Finance Minister was speaking to reporters and

guests at the Foreign Correspondents' Club of Cambodia, on June 30 and his

comments were made in the context of a broader description of the overall

difficulties facing Cambodia as it tries to attract foreign investors, in spite

of the release of an investment law draft from the Council of Ministers.

One problem in Cambodia is land speculation, Rainsy

explained.

Sam Rainsy said: "We have to create industrial zones in the

region of Sihanoukville, but there is problem with land shortage because big

plots of land have been illegally appropriated by big traders, who illegally

bought those lands from the military and from provincial authorities.

"So

I am very happy that our First Prime Minister, Norodom Ranariddh has said that

he doesn't care about the previous deals in the region of Sihanoukville.

"He will take a bulldozer, and he will destroy, he will push down all

those fences around those big plots of land to the sea, because they are

mountains, they are hills, they are a big portion of Cambodia, where some

businessmen have said that this is my property.

"Our First Prime Minister

said: 'I don't care, this is the property of the state, we will cancel all the

bad deals which have been made in Sihanoukville.'

" I think that this is

a very good encouragement to foreign investors."

Sam Rainsy said one

deterrent for prospective investors is the lack of cheap land. Land prices are

five times the price they should be, he said.

"I have an American

company, they want to build a factory to produce industrial jewelry. They say

why do I need to go to Cambodia? In Mexico, next door to the United States the

land is cheaper than in Cambodia, and Cambodia is a small

country."

Rainsy said: "Speculation and money laundering explain why land

prices are so high in Cambodia.

"Following the so-called privatization of

1989, there was a sell-off of state property. The people who could afford to buy

at that time were speculators looking for easy profits. They bought the land and

they sit on it and expect to reap speculation profits."

"The second

reason why land prices are so high, is because many lands are frozen by those

speculators. Many of those speculators are involved in money laundering.

Cambodia is an ideal place for money laundering.

"People who are

involved in drug trafficking, in all kinds of illegal businesses, like Cambodia

very much. First because we have a cash economy, and because the legal framework

[here] is very weak.

"With so few rules and regulations, so many

loop-holes, lack of clarity, no transparency, [Cambodia] is a paradise for money

laundering. And property development, and buying land is a means to launder

money," Rainsy explained.

Rainsy said that the just completed draft

investment law "is a very attractive investment law."

After describing

the law he said: "I cannot imagine more attractive incentives. It gives very

generous incentives to investors."

Rainsy said: "Incentives are only one

aspect of the problem of trying to attract foreign investors.

"There are

five additional problems that we have to deal with if we want to attract

investors, if we want to attract investors with international standing, serious

foreign investors who are willing to commit themselves to the long term

development of Cambodia."

Rainsy said that in addition to land prices,

security, infrastructure, corruption and rule of law are problems that Cambodia

needs to tackle.

Rainsy explained that investors need both physical and

economic security.

"Investors don't want to see a lot of soldiers, a lot

of armed people coming to ask for money. This is security. If you don't have

security in this broad sense you cannot attract foreign investors, "he said.

The second problem is infrastructure. Investors need roads, an airport,

a seaport, electricity, and running water, Rainsy said.

"You have to deal

with corruption in order to attract serious investors, because serious investors

want to be treated on an equal footing with other investors, to have fair

treatment." This is the third problem Rainsy explained.

"Corruption is

incompatible with free and fair competition. Investors want to compete on

quality, on price. Those who are competitive should win public contracts, should

gain market share, etc.

"Corruption is just the contrary of the market

economy. Because even if you are not efficient, even if you are not cost

effective, you can win public contracts by bribing corrupt officials, so it is

not a favorable environment for serious investors when corruption is so

wide-spread, is such an institutionalized practice. Corruption is a deterrent to

foreign investment.

"A large problem is a legal framework. But there are

many laws lacking, the land law, the labor law, the company law, the contract

law, the bankruptcy law, the arbitration procedure law, the administrative law.

"If there is no legal framework, no transparency, and this brings about

corruption and irregularities, this is not a favorable environment for foreign

investments," Rainsy said.